Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

asked the Minister representing the Minister for Trade, upon notice, on 13 December 2010:

With regard to the Australian Government's loan of AU$548.55 million to support the development of the liquefied natural gas project in Papua New Guinea (PNG LNG) in which the funds go to the project sponsor through Australia's export credit agency, the Export Finance and Insurance Corporation (EFIC):

(1) How is EFIC monitoring the social and environmental impacts of the PNG LNG project; (b) what are the results of this monitoring; and (c) can a account be provided on how EFIC is monitoring: (i) project related conflict, (ii) its impact on women, and (iii) the loss of livelihoods.

(2) Has EFIC sought feedback from civil society on the progress and impact of the project.

(3) To comply with the Equator Principles and International Finance Corporation (IFC) Performance Standards, are EFIC and other financiers of the PNG LNG project obliged to engage an independent expert auditor for the life of the project.

(4) Was the United States company D'Appolonia appointed with the agreement of borrowers and lenders as the independent expert auditor for the PNG LNG project; if so: (a) on what date was D'Appolonia appointed; (b) how many reports by D'Appolonia has EFIC received to date; (c) how many reports has the department received to date; and (d) in its reports on the PNG LNG project compliance with Equator Principles and the IFC Performance Standards, has D'Appolonia identified any issues of non compliance; if so, can these areas of non-compliance be specified.

(5) Have the PNG LNG project sponsors, who are receiving EFIC and Australian Government loan facilities, breached any loan covenants to date; if so, can the nature of any breaches be specified.

(6) Can an update be provided by EFIC on the implementation of the 'Joint Understanding between Papua New Guinea and Australia on further cooperation between the PNG LNG Project' (the Joint Understanding), including any progress on establishing a sovereign wealth fund.

(7) Given that point 13 from the Joint Understanding referred to terms of reference for the proposed subcommittee on extractive industries of the PNG LNG Ministerial forum: (a) can the Minister confirm whether the terms of reference have been agreed to; and (b) will the terms of reference be made public.

(8) Can an outline be provided of the key individuals within the department or the Australian Government providing advice on the establishment of a sovereign wealth fund.

(9) Can the Minister confirm whether ExxonMobil is providing advice on the sovereign wealth fund; if so, what is the nature of that advice.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

The Minister for Trade and the Minister for Foreign Affairs have provided the following answer to the honourable senator's question:

(1) In its capacity as one of the Lenders to the PNG LNG Project, EFIC receives from the Project a quarterly environmental and social report summarising the Project's construction, safety, security, health, environment and social management activities.

In addition to the Project's reporting, EFIC and other Lenders to the PNG LNG project required the borrower to engage an independent environmental and social consultant (IESC). While the IESC, D'Appolonia S.p.A (D'Appolonia) is paid by the borrower, it is solely responsible to the lenders including EFIC. D'Appolonia undertakes site visits to monitor the project's compliance with the Environmental and Social Management Plan and the lender's environmental and social standards and provides an independent report to the lenders following the visit. Please refer to question 4 below for further information.

Both the Project reports and the first IESC report are publicly available on the PNG LNG website. See:

http://www.pnglng.com/quarterly_reports/index.htm, and

http://www.pnglng.com/quarterly_reports/e_s_reports.htm

Conflict, gender impacts and livelihoods are all areas monitored by the IESC, D'Appolonia, and their advice to the lenders is contained in their publicly available reports listed above.

(2) D'Appolonia, as the lenders' IESC, is required to liaise with civil society (including civil society organisations, government, local leaders and local communities) as part of its work.

(3) Equator Principle 9 (Independent Monitoring and Reporting) requires the lender to appoint an independent environmental and/or social expert; or to oblige the borrower to retain qualified and experienced external experts to verify the borrower's monitoring information.

Paragraph 24 of IFC Performance Standard 1 (Social and Environmental Assessment and Management Systems) provides that for Category A projects, the borrower must retain qualified and experienced external experts to verify its monitoring information.

In the case of the PNG LNG project, an independent expert has been retained by the borrower. Under the terms of the financing documents, EFIC and other lenders to the project will also have access to the services of an independent environmental and social consultant for the duration of the loan agreements.

(4) (a) D'Appolonia S.p.A. ("D'Appolonia"), located in Genoa, Italy, was appointed in March 2010 as the post-financial close Independent Environmental and Social Consultant ("IESC").

(b) and (c) Since financial close D'Appolonia has conducted two site visits and one report has been finalised. Refer to the PNG LNG website for a copy of this report.

http://www.pnglng.com/quarterly_reports/e_s_reports.htm

(d) Section 2 of the D'Appolonia report (website link to report provided above) includes an Issues Table which summarises non-conformances (as that term is used in the D'Appolonia report).

(5) EFIC has not received notice of any breach of any obligation, undertaking or covenant with respect to the financing documents. Under the terms of these documents the borrower has an obligation to inform all Lenders, of which EFIC is one, of any such breach. Further, with each drawdown request (the frequency is approximately monthly) the borrower warrants that it is in compliance with the conditions under which the finance has been provided. In addition, no breaches of the agreed environmental and social obligations have been identified by independent monitoring undertaken by D'Appolonia.

The following four answers have been provided by the Minister for Foreign Affairs:

(6) Australia is working closely with the PNG Government to monitor implementation of the mutual understandings and commitments made under the Joint Understanding. This has included the first meeting of the Australia-Papua New Guinea LNG Ministerial Subcommittee in Melbourne on 1 July 2010.

The Australian Government is providing assistance in establishing Sovereign Wealth Funds (SWFs), which would allow the PNG Government to manage effectively and transparently future petroleum (oil and gas) revenue. In a media statement on 21 December, PNG Treasurer, Peter O'Neill, stated that the SWFs would be held offshore, while the establishment, ownership and control of those funds would remain in PNG.

Australia is providing technical and advisory support on the development of SWFs, particularly using our experience with the Future Fund. The Chairman of Australia's Future Fund Board of Guardians, Mr David Murray, AO, travelled to PNG from 29 November to 1 December 2010 as part of his engagement by the Australian Department of Finance and Deregulation (Finance) to provide advice on the establishment of SWFs.

Since then, Finance has provided the PNG Government with an outline of its assessment of the critical tasks/elements and timing in establishing SWFs in PNG. Finance, where asked by the PNG Government, will continue to work with the PNG Government to develop an implementation plan for the SWFs as well as provide assistance with the implementation, as required.

Australia is emphasising the need for consistency with the Santiago Principles, which represent global best practice in the transparent management of SWFs.

(7) (a) Point 13 of the Joint Understanding states PNG and Australia will establish a subcommittee of our annual Ministerial Forum to facilitate cooperation and review progress on the matters set out in the Joint Understanding. Terms of reference for the Australia-Papua New Guinea LNG Ministerial Subcommittee were agreed at its first meeting in Melbourne on 1 July 2010.

(b) The terms of reference are not currently public. Their publication would require PNG Government approval.

(8)    Officials from the Department of Finance and Deregulation are providing technical and advisory support, particularly using the experience gained in establishing the Future Fund and the Nation-building Funds. Finance has engaged Mr David Murray, AO, to provide advice and assistance to Finance on the development of PNG's SWFs.

(9)    Any advice or assistance PNG may be receiving on sovereign wealth funds from third parties is a matter for the PNG Government.